Want To Invest In IPOs? Don't Miss Out On These 20 Frequently Asked Questions

Indian companies and startups rolled out over 100 IPOs in the past two years, i.e. 2020 and 2021.?

So isn't it a no-brainer that IPO fever has gripped the financial ecosystem of our country in recent years? Surely it has.

In the last article, we talked about the must-know terms and financial jargon surrounding IPOs, understanding which is crucial before investing.

But if you are assuming that understanding IPO-related terms is sufficient for becoming ready to invest in IPOs, then you are wrong.?

Before you jump onto the IPO bandwagon, it would be prudent to have a look at some of the frequently asked questions surrounding IPOs.

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1.Where are the application forms available for applying/ bidding for the shares??

Application forms for applying/bidding for shares are available to all syndicate members, collection centres, the brokers to the issue and the bankers to the issue.?

In case you intend to apply through a new process introduced by SEBI i.e. Applications supported by Blocked Amount (ASBA), you may get the ASBA application forms from the Self Certified Syndicate Banks, as per SEBI.?

2.Who prepares the IPO's offer document??

The offer document is prepared by SEBI registered Merchant Banker(s). They are required to practice due diligence while preparing the offer document, whose draft is submitted to SEBI and put on a website for public comments.

3.Is it compulsory to have a Demat Account for IPO investing??

All the public issues of size in excess of ? 10 crores are to be made compulsorily in Demat mode.?

Hence, if you intend to apply for an issue that is being made in a compulsory Demat mode, you are required to have a Demat account and also have the responsibility to put the correct DP ID and Client ID details in the bid/application forms, as per SEBI.

4.Is it compulsory to have PAN Card for IPO investing??

Yes, it is compulsory to have PAN.?Any investor who wants to invest in an IPO should have a PAN which is required to be mentioned in the application form, as per SEBI.

5.For how many days an issue is usually required to be kept open??

The period for which an issue is required to be kept open varies.

As per SEBI, For Fixed price public issues: 3- 10 working days, for Book built public issues: 3- 7 working days extendable by 3 days in case of a revision in the price band, and for Rights issues: 15- 30 days.?

6.When does the bidder/investor get the allotment/ refund of shares??

In the case of fixed-price public issues, the time taken would be 30 days from the closure of the issue. Whereas for book built public issues, it generally takes 15 days from the closure of the issue. As far as rights issues are concerned, it takes 15 days from the closure of the issue.

7.How can I know about the demand for an issue at any point in time??

The status of bidding in a book built issue is available on the website of BSE/NSE on a consolidated basis. The data regarding bids is also available investor-category wise. After the price has been determined on the basis of bidding, the public advertisement containing, inter alia, the price as well as a table showing the number of securities and the amount payable by an investor, based on the price determined, is issued.?

8.How to get a refund in an issue?

You can get refunds in an issue through various modes, i.e... registered/ordinary post, Direct Credit, RTGS (Real Time Gross Settlement), ECS (Electronic Clearing Service) and NEFT (National Electronic Funds Transfer).?

9.When will the allotted shares get listed??

In the case of book built public issue, the listing of shares is usually done within 3 weeks after the closure of the issue. In the case of a fixed price public issue, it tends to be done within 37 days after the closure of the issue, as per SEBI.

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Also Read:?How To Invest In An IPO? We Cut Through The Clutter And Tell You The Correct Way To Buy One

10.How to know which are the upcoming IPOs in the market??

The information about the forthcoming issues can usually be obtained from the websites of Stock Exchanges.

Also, the issuer coming with an issue is usually required to give issue advertisements in an English national Daily with wide circulation, one Hindi national newspaper and a regional language newspaper with wide circulation at the place where the registered office of the issuer is situated, as per SEBI.

11.How to find the status of offer documents filed by issuers with SEBI??

Market regulator SEBI generally updates the processing status of offer documents on its website every week. The draft offer documents and then also the final offer documents are put up on the website to spread the required information.?

12.Whom to approach if you have grievances surrounding non receipt of shares, delay in refund etc.??

You as a bidder/investor can approach the compliance officer of the issue, whose name and contact number are mentioned on the cover page of the Offer Document.

13.What is Book Building Process???

Book building is a process of price discovery. The issuer discloses a price band or floor price before opening the issue of the securities offered.?

On the basis of the demands received at various price levels within the price band specified by the issuer, It's usually the Book Running Lead Manager who in close consultation with the issuer finally arrives at the price at which the security offered by the issuer can be issued.?

14.What happens after bidding process is complete in book building??

After the bidding process is complete, the ‘cut-off’ price is arrived at on the basis of the demand for securities. Then the basis of allotment is finalized and the allotment/refund process is undertaken.?

Post that, the final prospectus with all the details including the final issue price and the issue size is filed with ROC, hence completing the issue process.?

15.What is a price band?

The price band is a range of prices within which investors can bid for the issue.?

The spread between the floor and the cap of the price band shall not be more than 20%. The price band can be revised. If done, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding 13 days, according to SEBI.?

16.How does the “cut-off” option work for retail investors??

The “Cut-off” option is available only for retail individual investors. Such investors are required to tick the cut- off option which indicates their willingness to subscribe to shares at any price discovered within the price band. If the price indicated by applicant is lower than the price discovered, the cut-off bids always remain valid for the purpose of allotment.?

17.Can the bid be changed/revised??

Yes, you can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing or revising the bids has to be completed within the date of closure of the issue.?

18.Can the bid be cancelled??

Yes, you can usually cancel your bid anytime before the finalization of the basis of allotment by approaching/ writing/ making an application to the registrar to the issue.?

19.What proof can be received as a bidder for entering bids?

Whenever a bid is entered by trading members, a unique transaction registration slip is automatically generated. This transaction registration slip gives details regarding the number of shares bid for, price, the client name etc.

20. Is it possible to enter bids less than the stated floor price?

No. Bids below the floor price are automatically rejected since that's the minimum price.

Also Read:?From LIC & Oyo To Byju's: Top IPOs You Should Look Forward To In 2022

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